Mortgage Debt in Retirement

Seniors-Mortgages77% of baby boomers deem it “important” to pay off their mortgage by retirement, says TD. (Survey Link)

It’s good to see that number going in the right direction. RBC did a similar study in 2007 that found 66% of Canadians believe a free-and-clear home is important at retirement.

But many Canadian’s are not walking the talk:

  • TD says 54% of boomers have paid off less than half of their mortgage.
  • RBC says almost 1 in 4 retirees have a mortgage on their primary residence at retirement. (We fully expect this ratio to climb due to rising home costs and consumers’ growing debt-addiction.)

Carrying debt later in life could coincide with three other trends:

  • More income will be diverted to debt repayment instead of investments
  • Long-term stock market returns could be notably less than expected (see this and this)
  • Pensions will make up less and less of the typical retiree's income.

In turn, Canadians’ homes could increasingly be their primary source of survival at retirement. That, and a ballooning seniors population, means more retirees could start tapping their homes for liquidity.

This will be music to the ears of HomeQ, the parent of reverse mortgage provider CHIP.  CHIP has posted solid revenue growth for each of the last five years. Demographics and retirement savings trends will likely boost its sales further…for many years to come. 



Side note:  At $6.80 a share, HomeQ could be a stock to keep an eye on. CHIP originations through the broker channel exploded 198% in the last year. (This is not a stock recommendation, just an observation.)

  1. Excellent observations! Even CMHC consumer surveys confirmed that more people would like to pay off their mortgage sooner than the original amortization. However, few actually put their intentions into practice. Maintaining a “lifestyle” is now more important than de-leveraging.

  2. I am one of those people who think the rate of return on equities will be disappointing. It just isn’t possible to average 9-10% stock returns if long term growth drops from 3-4% to just 2%. Most people don’t understand how this affects their retirement plans. If someone has 30 years till retirement they need to contribute $6,079 a year at 10% interest to have $1 million by age 65. If you now cut the annual return to 5%, that same person needs to save $15,051 a year!

  3. That why mortgage debt should be retired. Make same payments that went to mortgage to a well diversified portfolio and even at a 5% return on 15k invested annually will be good retirement income. Also the average person pays more then 15k/year on mortgage.

  4. There are lots of ways to use mortgage debt to your advantage. I am in my late 60’s and 35 years ago as I paid off my mortgage, my bank extended a line of credit that increased with each mortgage payment and the bank put a collateral mortgage on my home. I took that line of credit and for the first 10 years invested it in my RRSP to gain a tax refund. Then I used the money to invest in my NON-retirement accounts. I am then able to write off the interest against my earnings in my non-retirement account. Basically I was wiping out my mortgage and increasing my investments at the same time. Today I have a collateral mortgage only, and write off every penny of interest against anything my investments make. Just my two cents. Teddi Knight

  5. Hi Teddi,
    Thanks for the post. You’re absolutely right in that there is “good debt” and “bad debt.” What you’ve described is similar in principle to the Smith Manoeuvre which has benefits if executed properly (and risks of course).
    Mind you, there are those who argue that any debt in retirement is bad debt, but we’ll leave that to the financial planners to debate.

  6. Declared bankruptcy July 2010, kept house of $226,000 at 5.9% for 35yrs renewable May 2012. If I miss 4 regular payments of $600. bi weekly but put instead these 4 payments to principal only, am i saving & paying down my mortgage quickly I intend to make 4 payments worth and catch up on the regular scheduled interest/princ payments I would have missed.
    My credit rating is already awful.Please don’t judge me as i am in this predicament for helping others and Im actually intelligent!?

  7. retired at 61, AMERICAN company closed went back to the states. receiving full company pension, cpp. want to down size to condo will have $90,000. mtg ona $250,000 condo can I still go with the same mtg company. will they approve the new mtg?

  8. Hi tm,
    Given your low loan-to-value you’ll have a variety of options (assuming there are no serious issues with your credit or the property). The lender, rates and terms depend on your credit and retirement income. A good mortgage planner can present several options and quickly tell you if your present lender is an option.

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